WASHINGTON (AP) — The uproar over the Internal Revenue Service’s heavy-handed treatment of conservative groups seeking tax-exempt status can be traced partly to when New York University Law School went into the noodle business.
The 1947 episode — more on that later — helped produce conflicting laws covering the kinds of activities tax-exempt organizations may conduct. The IRS’ attempt to enforce those contradictory laws with vague regulations has sown even more confusion, tax lawyers, former agency officials and others agree.
“It’s hard for groups to understand what the standards are, and different lawyers have different definitions of where to draw the line,” said Abby Levine, who dispenses advice on nonprofit status to scores of groups as legal director of the liberal Alliance for Justice.
While no one interviewed by The Associated Press for this story defended the IRS’ targeting of tea party and other conservative groups, no one disputed that the rules governing political activities by tax-exempt organizations are hard for everyone to follow, including the IRS. With one law saying some tax-exempt groups must engage “exclusively” in social welfare work, while a regulation changes the threshold to “primarily,” President Barack Obama said last month that the result is “a bunch of ambiguity.”
In the spotlight is a section of the tax code that has become increasingly attractive to many organizations in recent years, 501(c)(4), which grants tax-exempt status to so-called social welfare groups. Over the years, such groups have been allowed to participate in overt political activity as long as they focus mostly on social welfare work. While many of them engage in little or no political activity, for those involved in politics the designation offers a valuable feature: It lets donors remain anonymous.
After the Supreme Court in its 2010 Citizens United decision allowed unfettered political spending by companies and unions, campaign spending by social welfare groups exploded. Between the 2008 and 2012 elections it tripled, to $254 million, according to the nonpartisan Center for Responsive Politics, which tracks political expenditures.
The IRS received 3,357 applications for Section 501(c)(4) status last year, nearly double the number in 2010, according to the Treasury Department.
Conflicting Laws, Ambiguous Language Help Fuel IRS Confusion « CBS DC